Food prices volatility: watch this space

A recent article by the Institute for Agriculture and Trade Policy (IATP) outlines the food price situation and the actions that need to be taken to reduce price volatility. In 2012, as prices began to creep higher and a third food price spike since 2007 looked likely, governments should have been poised to act to curb food price volatility once and for all. As the IATP authors believe, governments did not take this opportunity and failed to address the root causes of food price volatility.

This recent article is an update to the authors’ 2012 report, Resolving the Food Crisis, and calls for action to be taken around a series of themes:

• Donor funding for agricultural development
• Reducing biofuels expansion
• Curbing financial speculation on agricultural commodities
• Building food reserves
• Halting land grabs
• Addressing climate change

These issues are neither original nor specific to solving the problem of food price spikes. Instead they are frequently raised by NGOs and other stakeholders across the world and, as the authors point out, these problems are not going away. Not enough is being done to address them. There are huge opportunities for progress in 2013 but whether governments will seize them is another matter, as history attests. Action to address food price volatility from the G20 has revolved to date primarily around the Agricultural Market Information System (AMIS) and, while G20 leaders plan to meet in Russia this year, no meeting of agricultural ministers is planned. Decisions over the future vision of the World Trade Organisation Doha Development Round could be an opportunity to ensure trade rules ‘protect and promote food security,’ but given the previous disarray of the Doha Round this may be too much to hope for. New farm legislation in the US and reform of the Common Agricultural Policy in the EU show little sign of being transformative.

The Green Revolution in Retrospect

A new paper authored by Prabhu Pingali of the Bill & Melinda Gates Foundation, details the achievements and limitations of the Green Revolution.

The Green Revolution was a product of investment in and diffusion of agricultural research and its largest success was that cereal crop production outpaced population growth, with only a small increase in land area cultivated. As examples, between 1960 and 2000 wheat yields in developing countries increased 208% while between 1960 and 1990 food supply in developing countries grew 12-13%.

Building on the work of developed countries to improve staple crops, the Green Revolution, largely through the Consultative Group on International Agricultural Research, took high yielding varieties and adapted them to thrive in the conditions of developing countries. Indeed it is estimated that without the efforts of the CGIAR and national programmes world food and feed prices would have been 35-65% higher and average calorie availability would have declined by 11-13%. While these successes sparked further investment in agricultural research and its delivery from both public and private institutions, the post Green Revolution period saw investment in agriculture decline.

As the author points out investment in agricultural innovation is equally important now, particularly if we are to ‘sustain productivity gains, enhance smallholder competitiveness and adapt to climate change’. Evidence shows the returns to agricultural research are as high now as they were during the Green Revolution and in a recent meta-analysis have been estimated at a median annual rate of return of 40-60%.

The Green Revolution, however, was not without its shortcomings. As One Billion Hungry states, we need a new Revolution that addresses the limitations of the first, a Revolution in which there is renewed international interest due to the recent food price spikes.

Another Food Price Spike?

At the time of writing (August 2012) the worst drought in half a century is occurring in the US Corn Belt, despite high harvests having been predicted as little as two months ago. As an article in the Financial Times documented, 9 out of 10 acres of maize and soybean land is suffering drought and half of the maize harvest and a third of the soybean harvest are being categorised as poor to very poor.

Given that the US is the largest exporter of agricultural commodities, exporting 40% of the world’s maize and soybean crop last year, the impact on food prices is felt globally. Another increase in prices may lead to the same panic buying and export restrictions seen during the 2010 Russian heatwave and consequent cereal shortage.